How to Make Wiser Decisions!

Why do we have such a hard time making good choices?

When it comes to making decisions, we’re naturally biased to think that we are all good decision makers. Just as most people in hospital after a vehicle accident they caused still maintain they are good drivers. There’s ample evidence that our brain’s are flawed. And in business that costs money.

But how can we do better?

Researchers, Dan Lovallo, and Oliver Sibony, investigated 1,048 important business decisions over 5 years, tracking both the ways the decisions were made and the subsequent outcomes. They found that in making most of the decisions, the teams had conducted rigorous analysis. They also asked the teams about their decision process – the softer, less analytical side of the decision. Had the team explicitly discussed what was still uncertain about the decisions? Did they include perspectives that contradicted the senior executive’s point of view? Did they elicit participation from a range of people who had different views of the decision?

Lovallo and Sibony found that our decision process – how we structure our thinking about the decision, is more important than the analysis – the technical assessment of the relevant information. Good decisions – those that increase revenue, profits, and market share, were predicted by process more than analysis – by a factor of six!

Here are four ways to counter bias and make better – even wiser – decisions:

Widen Your Frame
Teenagers get trapped in a narrow frame. They are blind to their choices. Unfortunately, most organisations tend to make decisions like teenagers. Often our options are far more plentiful than we think. Focusing on our current options means that other things are out of our spotlight. To escape a narrow frame and widen your options think about opportunity cost, or try the vanishing options test: What if your current options disappeared?

It’s easier to spot a narrow frame from the outside. “Whether or not” decisions should set off alarm bells!

Consider the Opposite
To overcome confirmation bias – hunting for information that confirms our initial assumptions (which are often self-serving) – we need to spark a constructive disagreement within our organisations. We can ask disconfirming questions – questions which probe for potential problems, and even consider the opposite of our instincts. It might be possible to test our assumptions with a deliberate mistake.

Because we naturally seek self-confirming information, we need discipline to consider the opposite.

Overcome Short-Term Emotion
Fleeting emotions tempt us to make decisions that are bad in the long term. To overcome distracting short-term emotions, we need to attain some distance. Our decisions are often altered by two subtle short-term emotions: (1) mere exposure: we like what’s familiar to us; and (2) loss aversion: losses are more painful than gains are pleasant. Loss aversion + mere exposure = status-quo bias.

We can attain distance by looking at our situation from an observer’s perspective. Perhaps the most powerful question for resolving personal decisions is “What would I tell my best friend in this situation?”

Bookend the Future
The future is not a “point” – a single scenario that we must predict. It is a range. We should bookend the future, considering a range of outcomes from very bad to very good. To prepare for the lower bookend, we need a pre-mortem: “It’s a year from now. Our decision has failed utterly. Why?” To be ready for the upper bookend, we need a pre-parade: “It’s a year from now. We’re heroes. Will we be ready for success?”

Anticipating problems helps us cope with them. By bookending – anticipating and preparing for both adversity and success – we stack the deck in favour of our decisions.

Test Your Decision-Making Process
To find out about your decision-making process, we invite you to take the DPS (Decision Processing Survey), the first instrument to reliably identify and measure three orthogonal information processing modes which contribute to good decisions – Deliberative, Intuitive, and Considerative.

When you complete the 10 minute survey your report will be generated and will sit on our server. Contact us to get your report and a personal debrief from either, Dr Barry Partridge or myself, Peter Webb.